Posts Tagged ‘Poverty’

In rich countries a handful of dollars does not go very far, indeed most people in the UK wouldn’t think twice about spending this on a cup of coffee. But one in five people in the world today has no choice but to survive on less than US$2 a day, and 1.5 billion people struggle to live on less than US$1. The vast majority of those affected are children, each an individual story of unfulfilled hope and potential.

Few would dispute that ‘a world free from poverty’ is the overwhelming challenge of the 21st century. The crucial issue is how to achieve this. In Just Give Money to the Poor: The Development Revolution from the Global South (Kumarian Press, 2010), Hanlon, Barrientos and Hulme discuss a wave of new thinking on development that is sweeping across the South. Instead of relying on a large and expensive aid industry to find ways to ‘help the poor’, it is better to transfer money and resources directly to the households in poverty so that they are able to find effective the most effective ways to escape from poverty.

This is the premise behind social transfer programmes such as Mexico’s Oportunidades, Brazil’s Bolsa Familia, South Africa’s Child Support Grant, and India’s National Rural Employment Guarantee Scheme. They all provide regular transfers of money to households in poverty with the aim of improving their nutrition, making sure children go to school, and ensuring that expectant mothers have regular check-ups.

This does not rule out the need for investment in economic growth and basic services. Small transfers to very poor households help provide access to new economic opportunities and vital health and education services. Without such transfers, the costs of transport, school uniforms, medicines, and job search could well be prohibitive.

Social transfer programmes do not throw money from helicopters. They carefully select and monitor recipients, ensure they are well informed about objectives, and track outcomes. In Latin America, transfers are paid directly to mothers thus strengthening their voice within the household. The responsibilities of the government and the households are carefully discussed at registration.

Despite attempts by the aid industry to take credit for these initiatives, social transfer programmes are most often national responses to local problems. Brazil’s Bolsa Familia began as a municipal programme in Campinas in 1994/5 and is built on domestic learning and experience of what works to reduce poverty. India’s National Employment Guarantee Scheme, which guarantees one hundred days labour on demand to unemployed rural heads of household, also builds on a careful assessment of similar programmes in Maharashtra and elsewhere. . Social transfer programmes have high set up costs and for this reason international assistance is important in low income countries. Nonetheless, sustainability and legitimacy requires domestic political support and finance in the medium term. Giving money to households in poverty is a ‘Southern project’, as the considerable diversity of programmes around the developing world demonstrates.

Important challenges remain, especially in low income countries lacking the capacity to design, deliver, and finance social transfer programmes. In many countries their institutionalisation is precarious. The existing social transfer programmes need to be seen as a first stage in the development of strong and stable institutions, able to protect poor and vulnerable populations in the South from the volatility and crisis of the global economy on. Acknowledging these challenges, the book makes the important point that knowledge on how to eradicate poverty is already freely available if only we care to learn from the South.

The Monfort Plan is a modest proposal that describes the new architecture of capitalism. Jonathan Swift wrote his Modest Proposal in 1729, in which he identified three classes of readers: the superficial, the ignorant and the learned. According to Swift “the superficial reader will be strangely provoked to laughter”, whereas “the ignorant reader will find himself disposed to stare”. For years the diagnose of extreme poverty targeted Swift’s truly learned readers and forgot the superficial and the ignorant.

In a recent article on This is Africa, Columbia Professor Jeffrey Sachs wondered if the world leaders would be “brave enough to invent new programmes and institutions that have the legitimacy and commitment to pull the world through this crisis to a fairer and more sustainable future”. A new architecture is the only path to the world of 2050, a world of cornucopia (food abundance) and eutopia (universal welfare). A new architecture is the only approach to building up new programs and institutions that have Sachs’ legitimacy.

Extreme poverty continues to perpetuate because we have failed to eliminate its causes. Extreme poverty is originated and perpetuated because developed countries have failed to reform in six areas that represent the Axis of Feeble, an Axis that has to be defeated in an intellectual war with Weapons of Mass Persuasion. The six components of the Axis of Feeble are agriculture, trade and labor rights, small arms trade, extractive industries, financial architecture and brain drain.

Past wars defeated the Axis Powers and current wars aim at defeating the Axis of Evil. Past and current wars had to identify and defy the enemy and the opposition forces to be defeated. The Axis of Feeble is maintained and perpetuated by the Pirates of Heartless Capitalism and the Bretton Woods Elites, who will use their propaganda tools to oppose a paradigm shift.

In the first part of his autobiography, the American diplomat George F. Kennan pointed out that “We of this generation did not create the civilization of which we are part and, only too obviously, it is not we who are destined to complete it. We are not the owners of the planet we inhabit; we are only its custodians”. The Axis of Feeble will not be defeated unless all custodians become passengers of a Journey of no return, and not simple spectators.

My forthcoming book may be appealing to the truly learned readers. We must all become passengers of the Journey of our lifetime. The Monfort Plan is designed having in mind every audience. It proposes new content with the ability to entertain every audience. It is through entertainment that the average citizen in Europe and North America can be educated in issues that are vital for the future of our planet and the humankind. It is through education that the average citizen can raise his or her level of awareness. Only if we, as a society, raise our level of awareness, will we welcome reform in the six components of the Axis of Feeble.

For decades we lived with an architecture that played its role, an architecture that has become a caricature of what it once was, a vintage architecture not designed for the challenges of the twenty-first century.

We live the best world we have ever inhabited. We are approaching our tipping point as a global society. We must become men and women of stature. I identified the One Hundred Expert Dreamers that will become the best team of experts that has ever been put together to serve the global public interest. With their combined wisdom and intellectual strength the Expert Dreamers will defeat the Axis of Feeble and the Pirates of Heartless Capitalism.

We are not the dwellers of the blue planet, only its custodians. We must recuperate the courage of the visionaries of the 1940s and 1950s who created an architecture that changed the world for good. The Expert Dreamers are the disciples of Marshall and Truman, of Clayton and Kennan, of Monnet and Schuman. The orthodox thinkers and the current political leaders condemned the imagination and creativity in the policy-making process to perpetuate in the cage of the orthodox. We must start living a life in full color. We must again love and dream. The Sleeping Beauty must wake up and embrace the forgotten continent. The American friends will fall in love, one more time, with the Sleeping Beauty.

It is time. It is our time. Let’s move ahead.

Jaime Pozuelo-Monfort is Author of The Monfort Plan (Wiley Finance, April 2010). More information can be found at http://themonfortplan.com

Bangladesh is one of the countries that will be worst affected by climate change. Rising sea and coastal water levels and more frequent storms threaten this low-lying country. Adapting Bangladesh to climate change is urgent – especially to prevent the reversal of recent progress in poverty reduction there.

An excellent set of pictures on the theme of climate change in Bangladesh can be seen at the BBC here.

BWPI will be undertaking with BRAC a new research programme on climate change and its implications for poverty in Bangladesh. Watch this space over the coming months. In the meantime check out the BWPI and CPRC working paper series for more on Bangladesh.

“… donor countries can talk the talk but not walk the walk. According to the Unesco study, the aid required for even the most basic primary education provision in poor countries is US$11 bn (£7.2bn) a year. In 2006, spending amounted to around $4bn, leaving a funding gap of $7bn. To put that figure into context, it is around 10% of what Britain spent this autumn recapitalising the banking system”.

I would add that education is the only investment you can be sure of getting at least some return on – provided it’s of good quality and children complete a minimum of 4 years primary education. Well-educated people earn more in the labour market, and find it easier to absorb new technologies and methods when they run micro-enterprises and farms. Education is a means to break the inter-generational transmission of chronic poverty (see this CPRC study for Bangladesh).

And even if it didn’t raise income much – which might be the case in economies that are growing only slowly – it certainly improves health status, especially of children, when mothers are educated. Educated mothers are 50% more likely to immunize their children than mothers with no schooling (go here). Gender inequality in education has high costs for both the family and society (see this IFPRI study).

So the chronic underfunding of education reminds me of that old quotation: if you think education is expensive, try ignorance.

The last quarter of 2008 has seen a lot of talk-talk on development finance. The long-awaited High Level Forum on aid effectiveness was held in Accra in September as well as the UN’s high level event on the MDGs in New York. Calling an event ‘high-level’ lets the international community claim that progress has been made – just by getting senior people together in one place.

What will Doha bring? Can it make headway against the very strong currents now running through the global financial system? Will rich country donors be able to afford aid? On this and other issues see my WIDER Angle article with George Mavrotas – Development Finance: New Opportunities for Doha. We explore the topic further in our new UNU-WIDER book Development Finance in the Global Economy: The Road Ahead (Palgrave).

In my recent post on Sorious Samura’s programme for Panorama on BBC One – an expose of aid to Africa, in particular to Sierra Leone and Uganda – I said we would come back on whether Uganda is experiencing a negative impact from the aid flows.

Remember the issue is whether foreign aid to Uganda is deterring export production via a “Dutch Disease” effect. If so, then aid is having perverse effects, hindering rather than helping economic growth.

How does this work?

Short explanation: A capital inflow like foreign aid raises domestic demand. This pushes up domestic prices and, if the exchange rate is not fixed by the government, the currency tends to appreciate as well (a shilling buys more dollars). Hence: exporting is less profitable and imports are cheaper (putting pressure on domestic producers of import-substitutes – for example domestic food crops suffer competition from cheaper food imports). Result: economic growth falls.

(Long explanation: The money is spent on two types of goods and services. First, non-tradables, that is items whose prices are mainly determined by domestic supply and demand. The price of a haircut in Kampala for example. Haircuts aren’t internationally traded. Second, tradables. These are goods and services whose prices are driven by international markets. The price of Uganda’s coffee, for example (Uganda is a ‘price-taker’ in commodity markets: some countries are big enough exporters to affect world prices – Saudi Arabia and oil, for example). A demand expansion caused by a capital inflow tends to push up the prices of non-tradables more than tradables, because the former are less-responsive (more inelastic, as economists say) in supply. The ratio of non-tradable prices relative to tradables prices rises, making it more profitable to produce the former. If the exchange rate is flexible – i.e. the central bank doesn’t fix it as a matter of policy – then it tends to appreciate as well. This adds to the appreciation of the real exchange rate that is caused by the rise in domestic prices as non-tradables prices outpace tradables prices. Result: people give up producing tradables such as coffee and move into the non-tradables sector, and growth falls).

Aid is not the only capital inflow that might cause this. The term Dutch Disease was first coined (and is most often used) to describe the impact of a natural resource windfall (natural gas in the case of 1970s Netherlands). Nigeria and other oil exporters suffered catastrophically from Dutch Disease in the 1970s when oil prices boomed (resulting in a severe contraction in Nigeria’s agriculture, a highly tradable sector).

However, much depends on what aid (or oil revenue) is used for. If it finances infrastructure construction, and if this is the right kind of infrastructure, then aid will have a supply-expanding effect. This could be of sufficient scale to offset any Dutch Disease effect (or the latter might be evident for a while until the infrastructure is built and then productivity effect kicks in: see Chris Adam and David Bevan).

So much for the theory. What about Uganda? The country has certainly had a large injection of aid, which has a big budgetary impact (see MartinBrownbridge and EmmanuelTumusiime-Mutebile). An IMF study, by Mwanza Nkusu argues that Dutch Disease does not necessarily occur – especially when the economy has unused capacity (which is typical of countries like Uganda recovering from civil war). So the academic jury is still out.

What does recent data tell us? Economic growth was just under 10 per cent over 2007-08 according to a recent IMF staff mission to Uganda. Exports grew by 50 per cent over the same period. The Fund expects both to fall – the result of the global financial crisis that is weakening commodity prices (go here). Uganda is dealing with high inflation (core inflation is 14.5 per cent) – but this is more the result of the run-up (until recently) in global energy and food prices. The shilling has depreciated, not appreciated, recently. So, no indication of aid having Dutch Disease effects: the shilling is down, not up, and exports are up, not down.

But certainly the economy faces a tricky adjustment as it responds to the global economic shock of the last 6 months (true of all low-income, primary-commodity dependent, economies).

Whatever the other effects of aid on Uganda (whether it is being well spent, whether it targets the poor effectively etc.) there does not seem to be a Dutch Disease effect – at least recently. Perhaps more worrying is the potential Dutch Disease effect of the oil revenues that come on stream next year. If Uganda can manage oil well then it will be the first country in Africa to do so. Now that would be an achievement.

Tony Addison is Executive Director of the Brooks World Poverty Institute, University of Manchester.

Internationally acclaimed film maker Sorious Samura has a critical article on aid on the BBC News web site in advance of his Panorama programme on aid to Sierra Leone and Uganda – which is broadcast tonight (see our post a few days ago). He writes:

“Where I come from in West Africa, we have a saying: “A fool at 40 is a fool forever”, and most African countries have now been independent for over 40 years. Most are blessed with all the elements to help compete on a global stage….. And yet today, my continent, which is home to 10% of the world’s population, represents just 1% of global trade. I have no doubt we have to take responsibility for our failures. We can’t afford to keep playing the blame game. But when 50 years of foreign aid has failed to lift Africa out of poverty, could corruption be the reason?”

Much of what he says hits the nail on the head. Corruption has been pervasive, and the Rich World must take its share of the blame – for everyone taking a bribe, there is someone giving. And ‘grand corruption’ has been spectacularly rampant in Africa’s oil sector (see EITI here). My IDPM Colleague, Sarah Bracking, has a new book out on corruption and development and what is being done to reduce it (go here).

One point that I do take issue with in Sorious Samura’s article is his view that Uganda is being crippled by what economists term ‘Dutch Disease’, resulting from large aid inflows:

“Large inflows of foreign currency push up the value of the Ugandan shilling making its agricultural and manufactured goods less price competitive. This results in fewer exports and less home-grown, sustainable earnings for the country. Local entrepreneurs such as coffee growers and flower exporters should be cashing in on rising food and commodity prices across the globe at the moment, but they are finding themselves crowded out of their own economy by foreign aid dollars”.

Maybe, but I would like to see hard evidence of this in Uganda’s case. Aid also funds infrastructure investment which, when well-designed, reduces the costs of production, marketing and transport. This raises the profitability of businesses that use the infrastructure. This can more than offset the disincentive to export production resulting from the currency appreciation that Samura worries about, making exporting more profitable, not less, after aid.

As I said it has to be well-designed aid. Aid that simply goes to raising consumption won’t do the trick (although if it is consumption of the poor – including humanitarian aid – then I worry less). And nobody doubts that Africa needs a lot more infrastructure – partly to change the pattern of infrastructure that was created to serve the colonial economy. That pattern still dominates much of Africa 40 years on. Disadvantaged regions, in which chronic poverty is high, especially need better transport infrastructure. Tim Harford, the Undercover Economist, quotes a study that road transport in Francophone Africa is six times more expensive than in Pakistan.

So, I look forward to tonight’s Panorama programme. Sorious Samura will be rightly hard-hitting. We can’t tolerate corruption. And we need well-designed and well-implemented aid. In the meantime, I shall be reading up about Uganda’s aid programme, and whether “Dutch Disease” has been a problem. If you have some suggestions, do please send them along.

Tony Addison is Executive Director of the Brooks World Poverty Institute, University of Manchester.

Next week’s Panorama on BBC One is running a programme on aid to two countries for which Britain is one of the biggest donors. To judge from the blurb, it’s going to be very critical:

“Reporter Sorious Samura visits Uganda and his home country of Sierra Leone to reveal how aid money is lost, stolen and frittered away. He stops at a showpiece hospital, run by a well-funded health department, that looks like a warzone – yet its carpark is home to dozens of new 4x4s for ministry staff. He questions a former minister accused of stealing funds and offers his vision of how Africans can take control of their own destiny”.

Sorious Samuara has done some brilliant films exposing Africa’s “big men” and their corrupt ways, the other side of the coin to the region’s hunger and poverty (go here). But I do hope that he offers more than the usual critique of aid in the Panorama programme.

Yes, corruption is rife in Sierra Leone (it was a big issue in the last elections, with a clean-up promised: see this BBC report). And on a recent visit to Uganda I saw that the local media is full of stories of corruption (the benefits of a free press in Africa! See The New Vision). DFID is presently “ghost-busting” in Uganda (go here).

But I very much doubt that either Sierra Leone, Uganda (or Mozambique – another post-conflict country) would be where they are today without the aid they received to help reconstruction.

So we shall see what Panorama concludes – especially, as Sorious Samura asks: how can Africans take control of their own destiny and graduate the continent away from aid dependence? Let us know what you think of the programme – and the big issues that it tackles.

BWPI’s Mike Edwards’ book on business-led philanthropy, “Just Another Emperor?” is attracting a lot of attention – especially in the current financial climate. You can follow the debate on OpenDemocracy. More later.

In the discussion of my recent post about bottled water I mentioned that sales of bottled water at Manchester University support water pumps in Africa. Specifically, Playpump, a wonderful invention from South Africa.

As children spin on a roundabout, clean water is pumped from underground into storage tanks. The pumps cost about US$9,500 to install. They are much faster and pump at a more reliable rate than hand-driven pumps, and can supply up to 1,400 litres of water an hour.

Better water infrastructure in Africa not only reduces the incidence of the main water-borne illnesses, but also reduces the amount of time that communities spend collecting water from (often dirty) ponds and rivers. Since water collection is often an activity for girls, requiring them to walk many hours when water is inaccessible, it provides more time for them – including more time in school. More information on Playpump can be found here.